NEED
TO KNOW - MORTGAGE INFORMATION

Cap: a limit, such as that placed on an adjustable rate
mortgage, on how much a monthly payment or interest rate can increase
or decrease.

Cash reserves: a cash amount sometimes required to be
held in reserve in addition to the down payment and closing costs; the
amount is determined by the lender.

Certificate of title: a document provided by a qualified
source (such as a title company) that shows the property legally belongs
to the current owner; before the title is transferred at closing, it should
be clear and free of all liens or other claims.

Closing: also known as settlement, this is the time
at which the property is formally sold and transferred from the seller
to the buyer; it is at this time that the borrower takes on the loan obligation,
pays all closing costs, and receives title from the seller.

Closing costs: customary costs above and beyond the
sale price of the property that must be paid to cover the transfer of
ownership at closing; these costs generally vary by geographic location
and are typically detailed to the borrower after submission of a loan
application.

Commission: an amount, usually a percentage of the property
sales price, that is collected by a real estate professional as a fee
for negotiating the transaction..

Condominium: a form of ownership in which individuals
purchase and own a unit of housing in a multi-unit complex; the owner
also shares financial responsibility for common areas.

Conventional loan: a private sector loan, one that is
not guaranteed or insured by the U.S. government.

Cooperative (Co-op): residents purchase stock in a cooperative
corporation that owns a structure; each stockholder is then entitled to
live in a specific unit of the structure and is responsible for paying
a portion of the loan.

Credit history: history of an individual's debt payment;
lenders use this information to gouge a potential borrower's ability to
repay a loan.

Credit report: a record that lists all past and present
debts and the timeliness of their repayment; it documents an individual's
credit history.

Credit bureau score: a number representing the possibility
a borrower may default; it is based upon credit history and is used to
determine ability to qualify for a mortgage loan.

D

Debt-to-income ratio: a comparison of gross income to
housing and non-housing expenses; With the FHA, the-monthly mortgage payment
should be no more than 29% of monthly gross income (before taxes) and
the mortgage payment combined with non-housing debts should not exceed
41% of income.

Deed: the document that transfers ownership of a property.

Deed-in-lieu: to avoid foreclosure ("in lieu"
of foreclosure), a deed is given to the lender to fulfill the obligation
to repay the debt; this process doesn't allow the borrower to remain in
the house but helps avoid the costs, time, and effort associated with
foreclosure.

Default: the inability to pay monthly mortgage payments
in a timely manner or to otherwise meet the mortgage terms.

Delinquency: failure of a borrower to make timely mortgage
payments under a loan agreement.

Discount point: normally paid at closing and generally
calculated to be equivalent to 1% of the total loan amount, discount points
are paid to reduce the interest rate on a loan.

Down payment: the portion of a home's purchase price
that is paid in cash and is not part of the mortgage loan.